foreign investment compliance framework policy statement

Foreign investment: Compliance framework policy statement

December 2020

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© Commonwealth of Australia 2020

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Contents Contents ....................................................................................................................................... ii

Foreign investment: Compliance framework policy statement ........................................................3

Objective of the framework ..................................................................................................................... 3

Scope of the framework ........................................................................................................................... 3

Figure 1: The Foreign Investment Compliance Framework ................................................................ 3

Foreign investment compliance roles and responsibilities ...................................................................... 4

How does Treasury undertake compliance activities under the framework? ......................................... 4

How does Treasury respond to non-compliance? ................................................................................... 5

Further information .................................................................................................................................. 5

Related documents .................................................................................................................................. 5

Attachment A: Offences and penalties under the Foreign Acquisitions and Takeovers Act 1975 (except in relation to residential real estate) ..................................................................................6

Attachment B: Overview of enforcement powers under the Foreign Acquisitions and Takeovers Act 1975 ..................................................................................................................... 10

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Objective of the framework Maintaining strong compliance with foreign investment legislation is a priority for the Australian Government, to ensure that foreign investment is not contrary to the national interest (or national security, as the case requires).

The Foreign Investment Compliance Framework (the framework) has been developed to provide strengthened assurance that foreign investors are meeting their compliance obligations, including by supporting foreign investors to understand their compliance obligations, while minimising the regulatory burden.

Scope of the framework The framework outlines the foreign investment compliance and enforcement objectives and draws together the different compliance and enforcement activities undertaken by Treasury and other entities, in the administration and support of Australia’s foreign investment regime. This document provides an overview of the framework, roles and responsibilities, and Treasury’s approach to compliance and enforcement activities within its area of responsibility.

Figure 1: The Foreign Investment Compliance Framework

FOREIGN INVESTMENT COMPLIANCE FRAMEWORK Foreign Acquisitions and Takeovers Act 1975

Foreign Acquisitions and Takeovers Regulation 2015

Regulatory Powers (Standard Provisions) Act 2014

Australia’s Foreign Investment Policy

Register of Foreign Ownership of Water or Agricultural Land Act 2015

COMPLIANCE AND ENFORCEMENT

Objective To provide strengthened assurance that foreign investors are meeting their obligations while minimising the regulatory burden

HOW

EDUCATION

educating foreign investors and their advisers on their obligations under the foreign investment legislation

MARKET INTELLIGENCE

using data and information to target potential non-compliance

COMPLIANCE

ASSURANCE

assessing and assuring compliance, which includes audits, monitoring and assessing information provided by foreign investors

ENFORCEMENT

undertaking enforcement action under the foreign investment legislation


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Foreign investment compliance roles and responsibilities Treasury is responsible for compliance and enforcement activities for proposals within its areas of screening responsibility, including business, agricultural and some commercial land foreign investment proposals. Further information on how Treasury approaches these activities is included below.

The Australian Taxation Office (ATO) is responsible for compliance and enforcement activities for proposals within its screening responsibility, including residential real estate and some commercial land proposals. Further information on how the ATO approaches these activities can be found in the Compliance – Residential Guidance.

Foreign investment compliance and enforcement activities may also be supported by other regulatory regimes and specialist advice from other entities, including Australian Government regulators, as required.

How does Treasury undertake compliance activities under the framework? The Treasurer and the Treasury have a range of tools available to assess whether obligations under Australia’s foreign investment legislation are being complied with and to respond to non-compliance.

We seek to understand the risk posed by investors and others in our regulatory framework along a compliance continuum. This helps direct the posture of our regulatory and compliance responses which may range from education to criminal prosecution.

The primary tool is educating investors on their obligations under the Foreign Acquisitions and Takeovers Act 1975 (the Act). Treasury aims to ensure that, for those seeking to invest in Australia, their obligations under the Act are clear and easy to understand. If you have questions on your

foreign investment compliance obligations, please contact [email protected].

Treasury also uses intelligence sources to target potential non-compliance. This enables pro-active detection and allows for early intervention to mitigate any risks to the national interest (or national security, as the case requires).

Treasury’s compliance assurance activities include audits, monitoring and assessing information provided by foreign investors. These activities aim to achieve a balance between ensuring strong


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compliance with the foreign investment legislation and supporting foreign investors to do the right thing. These activities may involve the use of legislative powers to:

• compel information and documents

• enter premises (either by consent or by court issued warrant) and exercise monitoring powers to determine whether the provisions of the Act are being complied with and that information provided is correct. Monitoring powers are standard powers under the Regulatory Powers (Standard Provisions) Act 2014 (RPA).

Treasury seeks to undertake these activities in a way that is professional, transparent, risk-based and

proportionate to the level of risk, in accordance with the Regulator Performance Framework.

How does Treasury respond to non-compliance? Where non-compliance is identified or suspected, a risk-based and proportionate response will be taken to rectify non-compliance and may include enforcing compliance through penalties and sanctions. The Act includes criminal and civil penalties for non-compliance. Details of these offences and civil penalties (other than those relating to residential real estate) are outlined in Attachment A.

Where necessary and appropriate, authorised officers may use legislative powers to enter premises (either by consent or by court issued warrant) and exercise investigation powers to gather material, relating to offence and civil penalty provisions of the Act. Investigations powers are standard powers under the RPA.

The Act provides a broad range of enforcement powers to enable a proportionate and scalable response to non-compliance taking into account matters such as the nature of the breach, the extent of the non-compliance, the investor response to non-compliance (including previous instances of non-compliance) and the behaviour of the investor.

Enforcement in this context is not limited to taking court-based action but rather refers to the use of these legislative powers. These powers are set out in Attachment B and are designed to deter non-compliance and ensure the national interest (or national security, as the case requires) is protected.

Treasury strongly encourages voluntary disclosure of non-compliance. In general, Treasury may prefer to work with the foreign investor to achieve compliance in cases where non-compliance is inadvertent, self-reported by the investor, the breach is administrative, and the investor is willing to remediate the breach as quickly as possible.

Further information For further information on foreign investment compliance obligations, please see firb.gov.au or

email [email protected].

Related documents Foreign Acquisitions and Takeovers Act 1975

Foreign Acquisitions and Takeovers Regulation 2015

Register of Foreign Ownership of Water or Agricultural Land Act 2015

Regulatory Powers (Standard Provisions) Act 2014

Foreign Acquisitions and Takeovers Fees Imposition Regulation 2015

Australia’s Foreign Investment Policy

https://www.pmc.gov.au/resource-centre/regulation/regulator-performance-framework

http://www.firb.gov.au/



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Attachment A: Offences and penalties under the Foreign Acquisitions and Takeovers Act 1975 (except in relation to residential real estate) * On or after 1 January 2021

Breach Maximum criminal penalty amount Maximum civil penalty amount

Failure to provide notice under section 81 of the Foreign Acquisitions and Takeovers Act 1975 (the Act) before taking a notifiable action or *notifiable national security action.

Failure to provide notice of a notifiable action or a notifiable national security action deemed under section 18A of the Act to have been a passive increase in securities held in an entity.*

Section 84 of the Act

Before 1 January 2021

Imprisonment for 3 years or 750 penalty units (or 3,750 if the person is a corporation), or both.

On or after 1 January 2021

Imprisonment for 10 years, or 15,000 penalty units (or 150,000 penalty units if the person is a corporation), or both.



250 penalty units (or 1,250 penalty units if the person is a corporation).


The greater of 5,000 penalty units (or 50,000 penalty units if the person is a corporation) or 75% of the value of the investment to a maximum monetary value of 2.5 million penalty units.

Note: An infringement notice may be given for contraventions that occur on or after 1 January 2021.*

Take before the relevant day mentioned in section 82 of the Act, a significant action, notifiable national security action* or reviewable national security action* that has been notified to the Treasurer.

Take an action after being advised by the Treasurer that the action may pose a national security concern.*












Attachment A: Offences and penalties under the Foreign Acquisitions and Takeovers Act 1975 (except in relation to residential real estate)

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Take an action that is under review and has been prohibited by the issuing of a notice of review (last resort powers).*

Section 85A of the Act







Engage in conduct contravening an order prohibiting proposed actions, interim order or disposal order.












Engage in conduct contravening conditions applied to a no objection notification, notice imposing conditions (on or after 1 January 2021) or in an exemption certificate.












Engage in conduct that contravenes a direction or interim direction given under the Act.*




Subsection 98A(1) of the Act


5,000 penalty units (or 50,000 penalty units if the person is a corporation.



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Give the Treasurer information or documents that are false or misleading that relate to a no objection notification for core Part 3 actions.*

Refer to Part 7.4 of the Criminal Code Act 1995. Subsection 98B(1) of the Act




Give the Treasurer information or documents that are false or misleading that relate to an exemption certificate.*

Refer to Part 7.4 of the Criminal Code Act 1995. Subsection 98B(4) of the Act


5,000 penalty units (or 50,000 penalty units if the person is a corporation).


Failure to notify the Treasurer of taking of action specified in no objection notification and exemption certificate or failure to notify of action specified in section 98E of the Act. *

Not applicable. Subsections 98C(2), 98D(2), 98E(2) of the Act




Failure to make and keep records. Section 119 of the Act


30 penalty units, or 150 penalty units if the person is a corporation.


250 penalty units, or 1,250 if the person is a corporation.

Not applicable.

Unauthorised record, disclosure or use of information that is not authorised by Part 7 of the Act.


Imprisonment for 2 years or 120 penalty units (or 600 penalty units if the person is a corporation), or both.

Not applicable.

Attachment A: Offences and penalties under the Foreign Acquisitions and Takeovers Act 1975 (except in relation to residential real estate)

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Failure to comply with a notice, given by the Treasurer, to provide information.

Subsection 133(5) of the Act


Imprisonment for 6 months or 30 penalty units (or 150 penalty units if the person is a corporation), or both.


Imprisonment for 6 months, or 250 penalty units (or 1,250 penalty units if the person is a corporation), or both.

Not applicable.


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Attachment B: Overview of enforcement powers under the Foreign Acquisitions and Takeovers Act 1975

Power Description

Order to prohibit proposed actions and interim orders

Prohibits an investor from taking all or part of a proposed action.

Interim orders are temporary orders that made by the Treasurer for the purposes of considering whether to make an order to prohibit all or part of a proposed action.

Disposal order If an action has already been taken and the Treasurer is satisfied the result of the action is contrary to the national interest, the Treasurer may make an order requiring the investor to effectively dispose of their investment. A disposal order is directed at unwinding the action.

Variation or revocation of exemption certificates due to false or misleading information or documents

An exemption certificate may be varied or revoked where the Treasurer is satisfied that a person has given false or misleading information or documents, or omitted a material fact or a thing where this information is relevant and given before the exemption certificate was given.

Revocation of no objection notification due to false or misleading information or documents

A no objection notification may be revoked where the Treasurer is satisfied that a person has given false or misleading information or documents, or omitted a material fact or a thing where this information is relevant and given before the no objection notification is issued.

Treasurer’s directions If there is reason to believe that a person has engaged, or is engaging, in conduct that constitutes a contravention of the Foreign Acquisitions and Takeovers Act 1975 (the Act), the Treasurer may direct an investors to address or prevent a contravention of the Act (or prevent a similar or related contravention).

Interim directions If there is reason to believe that a person has engaged, or is engaging, in conduct that constitutes a contravention of the Act, the Treasurer may direct an investors to address or prevent a contravention of the Act (or prevent a similar or related contravention) in circumstances where any delay in giving the direction would be contrary to the national interest.

Infringement notices An infringement notice is a financial penalty that an infringement officer may impose for certain breaches of the Act where there are reasonable grounds to believe that a contravention has occurred.

Civil penalty orders A civil penalty order can be made by a court for the payment of a financial penalty where the person is found by the court to have contravened a civil penalty provisions of the Act.

Enforceable undertakings An enforceable undertaking can be entered into by the Treasurer with a person in order to prevent, or respond to non-compliance with the Act.

Compelling documents or information relevant to the exercise of the Treasurer’s powers

The power allows the Treasurer to request information and documents from an investor, which supports desktop and paper based auditing and compliance monitoring.

foreign investment compliance framework policy statement

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